UPDATE 1-Hungary to launch new $3-4 bln savings plan-min

* To unveil growth and stability package in Feb: econ min

* Plans three-year social contribution reform

* Includes major simplification of tax regime

* Says growth, reforms to make up for lower tax receipts

* Forint inches up against euro, gov’t bonds unchanged

(Adds market reaction, more comments, detail)

BUDAPEST, Nov 23 (BestGrowthStock) – Hungary’s government will
present plans for 600-800 billion forints ($3.02-$4.03 billion)
of new savings measures next February in a fiscal reform
package, the economy minister said on Tuesday.
Gyorgy Matolcsy told a business conference the package would
contain nearly 100 structural measures, including a proposed
three-year reform of social contributions.

“(The) Hungarian growth and stability programme … will lay
down nearly 100 structural reforms, which will significantly
improve the operating efficiency of the budget and the state,”
Matolcsy said.

“On the spending side, this will entail savings worth
600-800 billion forints.”

The government had flagged a new savings plan to be
introduced from next spring but given no details of the size of
the programme.

Hungary’s forint currency firmed slightly against the euro
after Tuesday’s announcement while the bond market did not

“We need details (about the savings measures)… So far
these are only promises again,” a Budapest-based fixed income
trader said.

Matolcsy said the reforms, coupled with higher economic
growth expected in the 4-6 percent range by 2013-15 and more
people paying taxes as a result of a drastic simplification of
the tax system, would make up for revenue losses from income tax

“We will drastically simplify the tax system. Right now,
this applies only to the personal income tax regime but we plan
the same for VAT, corporate tax and every other tax type,”
Matolcsy said.

Hungary’s parliament has approved a flat, 16 percent
personal income tax rate from 2011 and a 10 percent rate for
companies with annual turnover below 500 million forints.

The government plans to extend the 10 percent corporate tax
rate to all companies from 2013. Matolcsy said the overall tax
take as a percentage of the economy could fall to 33 percent by
2014 from around 38 percent this year.

“This is a huge turnaround, we are going from one of the
highest tax burdens towards the lowest in the European Union,”
he said.

Analysts and the central bank have warned that the budget
deficit could rise again from a target of 2.94 percent of GDP in
2011 in subsequent years as tax revenues decline and new
“crisis” taxes on some business sectors are phased out.

(Reporting by Gergely Szakacs; Editing by John Stonestreet)

UPDATE 1-Hungary to launch new $3-4 bln savings plan-min